The Wall Street Journal on Jan. 10 looks at California's $35 billion budget gap over the next 18 months, a financial crisis that indicates "painful cuts in spending for education, health care and the poor are almost certainly on the way." In the first round of cuts, proposed by Gov. Gray Davis (D) in December 2002, eligibility rules for Medi-Cal, the state's Medicaid program, would become more stringent (Thurm/Rundle, Wall Street Journal, 1/10). Under the plan, the state would reduce income eligibility limits for families in Medi-Cal to 61% of the federal poverty level. The proposal also would require Medi-Cal beneficiaries to reverify their eligibility each quarter rather than each year. In addition, the plan would eliminate optional Medi-Cal benefits, such as dental care and medical supplies. The plan also would reduce Medi-Cal reimbursement to physicians and other providers by 10% (Kaiser Daily Health Policy Report, 12/10/02). The Center on Budget and Policy Priorities, a think tank in Washington, D.C., projects that the changes would eliminate some 500,000 "mostly low-income working parents" from the Medi-Cal rolls. The Journal notes that much of today's budget crisis stems from the massive tax cuts and spending increases that took place during the "stock-market and technology boom of the 1990s." B. Timothy Gage, outgoing finance director for the governor, said that "simply reversing boom-era largess" will not be "enough" to repair the state's budget deficit, but the governor will try to "minimize damage to the most vital programs." Davis is expected on Jan. 10 to announce his spending plan for the next fiscal year, which begins July 1 (Wall Street Journal, 1/10).

States Seek Help
In related news, Democratic governors on Jan. 9 submitted their $157 billion economic stimulus proposal, "castigating President Bush's new economic plan as a blow to state governments reeling from their worst fiscal crises in 50 years," the Washington Post reports (Weisman, Washington Post, 1/10). Medicaid and other health care costs account for 30% of states' spending, and those expenses rose 13% last year, the largest increase in a decade (Kaiser Daily Health Policy Report, 11/26/02). The governors' plan calls for $75 billion in tax cuts, $13 billion for schools, roads and homeland security, $19 billion for unemployed workers and low-income senior benefits, and $50 billion in "direct aid" for the states. States faced a combined $60 billion to $70 billion in budget deficits for the next fiscal year, and by law most must close the deficits through spending cuts and tax increases, according to Iris Lav, an economist at the Center on Budget and Policy Priorities. At the same time, Bush's plan could cost states $4 billion this year and $45 billion to $50 billion over the next decade by cutting taxation of investment dividends, according to Harley Duncan, executive director of the Federation of Tax Administrators. Lav said that "even a modest hit to state coffers" could lead to cuts in health care, as well as education and other state programs, according to the Post (Washington Post, 1/10).

State Deficits on 'NOW with Bill Moyers'
PBS' "NOW with Bill Moyers" on Jan. 10 will include a segment on "skyrocketing" state budget deficits nationwide and cuts in government services, including health care. The program focuses on the situation in California. The segment includes comments from Dr. Susan Fleischman of UCLA Medical Center. The program's Web site includes an overview of the issue, a list of related Web resources and a map of state budget resources. Check local listings for show times (Moyers, "NOW with Bill Moyers," PBS, 1/10).